Purpose The purpose of this paper is to investigate whether the Boardroom heterogeneity affects IPO underpricing for entrepreneurial firms, where Boardroom heterogeneity was classified in terms of functional background, educational background, age and length of tenure. Design/methodology/approach A national research design was conducted using data collected from 355 firms listed on China’s Growth Enterprise Market from its start in 2009 to 2012. Findings The author found that IPO underpricing has a significant negative correlation with functional heterogeneity, a positive correlation with educational heterogeneity, a significant negative correlation with age heterogeneity, but it does not show significant correlation with heterogeneity in tenure. Board heterogeneity affects IPO underpricing of entrepreneurial firms partially, which means functional, educational and age heterogeneity conveys signals to potential investors regarding a firm’s quality. Research/limitations/implications More entrepreneurial firms in more years for data and long-term performance research design in future research would be required for further understanding of the relationships among the variables in this study. Practical/implications This paper suggests that IPO firms may make use of such an influencing mechanism to determine the issue price or to control the IPO underpricing by showing the Boardroom heterogeneity. Originality/value This paper revealed the influence of the characteristics of board members of such firms on IPO underpricing, which is rare in recent studies comparing to the study for the top management team; also this study provides empirical support for such effect.
Manuscript Type Empirical Research Question/Issue Prior studies on the role of state investment tend to focus on either majority state ownership or aggregating majority and minority state ownership. Drawing upon signaling theory, we theorize that the negative intent signaled by minority state ownership reduces initial public offering (IPO) market performance. In addition, we hypothesize that founders as chief executive officers and outside directors not from state‐owned enterprises, representing the positive signal of intent, can attenuate the negative effect of minority state ownership. Research Findings/Insights The empirical results, based on 274 small and private firms in China's newly launched stock market, provide support for the hypotheses based on price premium, first‐day turnover rate, first‐day price increase, underpricing, and Tobin's Q. Theoretical/Academic Implications To the best of our knowledge, this is the first study to examine how minority state ownership affects small and private firm IPO performance. It suggests new avenues of research on ownership structure and the principal‐principal problem in the corporate governance of emerging economies. This study reveals the distinctive nature and effect between controlling state ownership and minority state ownership. The current research also opens new avenues of research on applying signaling theory, signal of intent in particular, in an IPO study. Practitioner/Policy Implications This study reveals the negative intent signaled by minority state ownership in privately controlled firms at IPO due to the weak monitoring capacity, limited resource provision, and enhanced political interdependency between private controllers and minority state owners. As minority state ownership becomes a more salient phenomenon in emerging markets, it guides policy makers in governance choices for government‐funded firms.
Purpose -The purpose of this paper is to study whether there is correlation between valuation in initial public offering (IPO) and board composition, the ownership dispersion of top management teams (TMTs) and their human capitals, in entrepreneurial firms of China's new growth enterprise market (GEM). Also, it aims to evaluate the relative importance of various factors in determining initial public issuing value. Design/methodology/approach -The SPSS 16.0 statistical package was used to perform the analysis. The authors compute descriptive statistics, calculate correlation coefficients for all variables and use multiple regression analysis test the hypothesis. Findings -The paper shows that IPO valuation has significant positive correlation with board composition, significant negative correlation with TMT ownership dispersion, but it does not show significant correlation with TMT human capital. The empirical results also show that: the influence of variable "CEO also Founder" on IPO valuation is significant, which indicates that investors are concerned with the leadership of firms in IPO. Also the influence of the variable "underwriter prestige" on IPO valuation is also significant, but weaker, which indicates that investors still keep confidence in the well-known underwriters for their vision and ability of judging the firms. Research limitations/implications -Based on the first batch of 28 entrepreneurial firms listed on Chinese GEM, the sample size is relative small. Also, the measure of TMT human capital, defined by the education degree level, is not an accurate rule in this paper. Originality/value -Focusing on 28 new firms in China's new security market, this paper presents some interesting and new findings, by using data from the first batch of listed companies in China's GEM, which comprises many privately-owned, high technology and entrepreneurial firms.
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